Higher Cereal and Meal prices reduce profitability; DDGS – protein meal of choice

Higher cereals and meal prices reduce profitability

Even though maize prices may have dipped by 3.2% in the open market (Mandi) to Rs.8400 per Mt on average. Prices against last year are higher by 12.7%. Average price is Andhra Pradesh was reported at Rs.8240 per MT, while in Karnataka and Tamil Nadu it was reported at Rs.7970 per MT. Reports are that the deliveries are also less and in some cases quality is an issue. Average prices for the month of May were Rs.8472, 16.15% higher than last year and 2.2% higher than last moth (April 2009).

On NCDEX, Jun and July contracts were up by 1 – 1.5% to Rs.8950 and Rs.9250 per MT respectively. August contract was stable at Rs.9265 per MT. SPOT prices at Nizamabad were down by 1.33% to Rs.8300 range, while Davangere was also down up 1% to Rs.8164 per MT.

Pearl Millet (Bajra) prices also moved lower by 3.2% to Rs.8760 per MT, but remained higher than last year by 20.7%. Prices were also higher than maize by 4.1%. Averge May 2009 prices were Rs.8960 per MT, about 23.7% higher than last year prices and 0.56% higher than last month (April 2009).

Sorghum (Jowar) prices also moved lower by 2.6% in t he market yard, to Rs.10,000 per MT. Prices were higher than last year by 1.4% and higher than maize by 16%. Averaage prices for the month of May 2009 were Rs.10524 per MT, 2.31% higher than lastyear (May 2008), and 8.09% higher than last month (April 2009).

Evidently the pressure is on corn by all organized feed players and integrators as they are unable to use other grains like Pearl Millet and Sorghum in their rations. Some of the integrators have increased the corn usage in broiler ration to 62%. In layer ration the usage is kept at 47-50%. The individual farmers on the other side play with the formulation and try to use local grains.

Barley prices moved up by 6.3% at the market yard to Rs.8626 per MT, but prices were lower than last year by 27.6% Average prices for may 2009 were Rs.8626 per MT, about 17% lowwe than lastyear, but 6.76% higher than last month (April 2009).

On NCDEX, the prices moved up by 0.5% for July and Sept contract to Rs.9400 and Rs.9690 per MT respectively. While for October contract, prices were down by 6%. In 6he spot market (Jaipur), prices were lower by 1.2%.

In the US prices moved higher by 1.4 – 1.6% on CBOT for July to Dec contracts. July $171.72; Sept $175.66; Dec $180.77 per MT. FOB gulf values were also up to 191/195 for Jun-August deliveries. FOB PNW was also higher to $206/210 per MT for Jun-August delivery. Sorghum is trading at a discount to corn in the US and FOB gulf prices are $185/190 per MT.

DDGS prices have also moved up due to higher demand in the domestic as well as export markets. Current delivery to SEA region is indicated at $250 per MT. FOB gulf value for DDGS is $204 per MT.

The prices of cereals are higher than last year and will remain higher, skyrocketing prices of protein meals is another factor that is affecting the profitability of livestock and poultry farmers farmers by increasing the cost of production of meat, milk and eggs. As per SEA of India report, prices of almost all extractions are up by 30-46%, Peanut Extraction +30%, Soybean +34%’ Rapeseed/Mustard +37%, Sunflower +46%. Oilcake prices are also up by 10-23%. Sunflower +10%,; Rapeseed Mustard +21%; Peanut Cake +23%. All prices are against last year's May average prices. There is a need to provide alternate source of protein to safeguard the interest and livelihoods of many farmers who are involved in livestock farming, including poultry. The new oil seed crop is still 6 months away and the requirements are bound to go up, rather than coming down.

DDGS – protein meal of choice

Reports are that DDGS has become the protein of choice in US and also in the export markets, specially Japan, Taiwan, Malaysia etc due to increased Soybean meal prices.

There are several instances when farmers in countries have used DDGS in the ration and have been able to reduce feed costs, without affecting the efficiency of production. In some cases, efficiency has also increased.

USGC office in Japan has been working closely with some dairy farms, Kaneso Dairy Farm (500 head milking+250 heifers), being one of them, which has been using 10% DDGS in their feed. The current production of milk per animals is 32 kg per head per day and has not beed affeted by the inclusion.

Another feed company ZEN-NOH, imports DDGS and supplies compounded feed to the dairy operations, containing 10-15% DDGS. Reports suggest that the DDGS fed cows produce same or better production levels against non DDGS fed animals. And the feed costs are also significantly lower.

The Council’s local dairy feed expert Hiroaki Igarashi says, the cows think DDGS is “udderly delicious” and the Japanese dairy farmers see the immediate reduction in their feed bill, which is important as well.

Amit Sachdev
India Representative,
U S Grains Council
usgcindia@gmail.com

Prices mixed in India, move up in the US

Prices mixed in India, move up in the US

Average corn prices moved up by 1.5% this week at the market yard to Rs.8683 per MT, which is about 17% higher than last year. Reports are that the Karnataka tender has been canceled and a retender will be called possibly by next month.

In the futures market, prices moved lower for June 0.5% to Rs.8850; July 1.45% at Rs.9115; at Aug 2.88% at Rs.9265 per MT. In the spot markets of Nizamabad and Davangere the prices remained stable at close to last week's values.

Preliminary planting reports indicate that due to high Soybean prices, farmers may increase the soy acreage by 10%. Also cotton acreage may increase as the prices moved up and imports of cotton are one. GOI of India purchase cotton, which helped in price stabilization. Overall expectation is that the oil seed area in India may go up by 4-5% by some sources.

Pearl Millet (Bajra) prices moved lower 1.2% to reach Rs.9050 per MT. The prices though are 23% higher than last year. Against maize the prices are 4.1% higher. Prices in Rajasthan and Maharashtra are Rs.9200 and 9400 per MT respectively.

Sorghum (Jowar) prices moved lower by 1.4% to Rs.10270 per MT, but against last year, prices are higher by 5.4%. Against maize the prices are higher by 15.4%. White sorghum is prices close to Rs.15000 per MT, while the cheapest sorghum variety is Rs.7000 per MT (Red).

Barley prices moved lower by 7.4% to Rs.8100 per MT on average. Prices are lower than last year by 26%. In the futures market as well, prices moved lower, For July delivery prices wee 3.1% lower than last week at Rs.9362 and for Sept it was 2.1% lower than last week at Rs.8640. In the spot market (Jaipur), prices were down by 0.5%.

In the International market (CBOT), corn prices moved up by 3.1 - 3.2%. Jun delivery was up to $169.36, while Sept was up at $173.3 and Dec at $177.94 per MT. FOB US Gulf prices were indicated at $188/193 per MT, while FOB PNW was indicated at $202/206 per MT. FOB US gulf prices for Sorghum moved up to $184/187 for Jun-Aug delivery.

Corn planting in US is lagging behind and USDA reports the planting at 62%, against 70% completed last year. Sorghum planting is complete at 38%, similar to last year while Barley is at about 50% against 89% last year. The wet days and planting delays could be one reason for the increased corn prices in US.

DDGS prices added $10 to its tally on high export demand and also increased domestic usage in the wake of higher SBM prices. Poultry and dairy operations in SEA region, Middle East region continue to increase usage of DDGS in poultry, fish and dairy rations. Current prices of DDGS delivered SEA region are about $240 per MT.

Freight rates moved higher a notch to $49/50 per MT for US Gulf - Japan sector, while PNW-Japan freight rates were $26/27 per MT as per reports. Freight rates from Argentina/Brazil to China have also moved up to $45/46 per MT this week.

Reports are that no price is being quoted for corn exports from Argentina and for the next month or so corn would be available from Brazil and Paraguay. For the Indian subcontinent, Bangladesh remains a good buyer as local prices are $205/207 per MT and the crop is expected to be lower than last year. India's exports might be slower as the Rupee appreciated, but higher prices in US could turn the tide again.

US congress accepted President Obama's Climate Change Bill, that aims to reduce green house gases in US, increase fuel efficiency of vehicles in US and use of renewable sources. Analysts believe that the ethanol production and blending will get a boost in US and the ethanol economy will be better over the next couple of years.

Amit Sachdev
India Representative
U S Grains Council
usgcindia@gmail.com

Coarse grain production estimates higher, prices mixed ; Poultry prices up in India but are farmers in profit

Coarse grain production estimates higher, prices mixed

Maize prices have moved up by 3.7% this week to reach Rs.8550 per MT at the Market yard. The prices are 15.5% higher than last year. The market is finding support because of export possibility to Bangladesh and other destinations and local demand as well as the starch and poultry sectors are on the revival path, though slowly. The production estimates (3rd advance estimates) by GOI for maize has been increased to 18.48 MMT Feb 2008 estimates of 17.04 MMT. Khariff production is estimated at 13.84 MMT against last estimates of 13.40 MMT, while Rabi production is estimated at 4.66 MMT, against last estimates of 3.64 MMT.

On the NCDEX, the prices moved up slightly for the near contract, up 0.70% to Rs.8610 per MT. For June, the value is close to 8895 per MT. For July though the prices are lower by 1% and up for Aug by 2.69% to Rs.9540 per MT. On the spot market prices in Nizamabad were down by 0.78% against last week to Rs.8436 per MT and prices in Davangere gained 0.8% to Rs.8126 per MT.

Pearl Millet prices also moved higher to Rs.9165 per MT, an increase of 0.5%. Against last year, the prices are higher by 20% and against maize prices are up by 6.7%. As per the new estimates, Pearl Millet production is estimated at 8.86 MMT.

Sorghum (Jowar) prices have moved lower by 8.7% to Rs.10,420 per MT at the market yard. Prices remain lower than last year by 9.3%, but are higher than maize by 18%. Sorghum production, as per the new estimates is expected at 7.27 MMT, against last estimates of 7.24 MMT.

Barley prices are lower in the local market by 2.7% to reach Rs.8760 per MT. Prices remain lower than last year by 16.3%. Barley production is estimated at 1.55 MMT against last estimates of 1.45 MMT.

Total coarse cereal production is estimated at 38.67 MMT against last estimates of 36.96 MMT, but is lower than last year’s final estimates of 40.76 MMT, and also the target of 42 MMT.

On CBOT, the corn prices moved higher in the week and then lower and by the end of the week prices were lower than last week to $164.24 MMT, down by 0.9% for July delivery. For Sept delivery, prices were at $167.94 MMT, lower by 0.65%, Dec delivery was $172.59 MMT, lower by 0.27%. Corn planting reports from USDA indicate 48% as completed and 14% as emerged. Planting is similar to last year. Barley planting is trailing at 33% against 75% last year.

The sea freight rates on the other side have moved up across the board. US Gulf-Japan benchmark was higher to $+48 per MT, while PNW-Japan was up to $+26 per MT. Argentina/Brazil to China was also higher at $43/44 per MT.

FOB US Gulf prices for corn were indicated at $184/188 per MT, while FOB PNW was at $197/182 per MT. Sorghum price (FOB US Gulf) were indicated at $179/182 per MT. DDGS prices have moved up slightly and were indicated at $235 to SEA region and to India would be close to $290 per MT.

With SBM prices moving higher, DDGS demand and usage is expected to be higher, which is likely to push the prices higher. New trials in Algeria have determined that a 10% DDGS inclusion rate will maintain the performance of the broilers when compared to the performance of chickens on the traditional corn/Soy rations and reduce the feed cost.

Poultry prices up in India but are farmers in profit

Prices of chicken in India are moving up, due to increase demand and possibly short supply. Prices this week in Delhi/Bombay/Punjab/Uttar Pradesh ranges between Rs.55-60 per kg live broiler. Prices in Hyderabad/Bangalore/Coimbatore crossed Rs.65 per kg live broiler. The prices of feed are ranging from Rs.16000 per MT (own mixing) to Rs.18000 per MT by feed companies, due to increased prices of two of the major feed ingredients namely corn and SBM, which are priced at Rs.10000 and 27500 per MT respectively. The cost of production of live broiler is about Rs.44-45 per kg under optimal conditions, but in cases where mortality is higher, cost of production is higher at Rs.50/55 per kg. Heat wave conditions in the country are a factor that is affecting weight gain in broilers, which is increasing the cost of production.

Wholesale egg prices in Delhi are Rs.212/213 per 100 eggs; while in Namakkal and Bangalore are Rs.226/227 per 100 eggs (less Rs.10 for Transport). Cost of production of eggs currently is about Rs.160/165 per 100 eggs on operating costs and adding cost of pullet rearing, the cost of production is about Rs.215 per 100 eggs, which is at par with the sale price. As per the trade reports, prices are likely to move up in the next week. Retail prices of eggs are Rs.300 per 100 eggs.

Amit Sachdev
India Representative
U S Grains Council
Email: usgcindia@gmail.com

Coarse grain prices strengthen in India

Coarse grain prices strengthen in India

Maize prices moved up slightly to Rs.8250 per MT on an average. While prices in Karnataka, Maharashtra and Tamil Nadu remained close to Rs.7700 per MT at the market yard, (much below the Minimum Support Levels), prices in other markets were close to Rs.8200 per MT. The prices were about 10% higher than last year.

On the futures market, corn has remained stable this week, except fot July, where prices moved up by 3%to reach Rs.9340 per MT. In the Spot market as well prices have remained stable.

Pearl Millet (Bajra) prices moved by slightly to Rs.8860 per MT at the market yard. Prices were higher than last year by 13% and higher than maize by 7%. FCI, Haryana has released about 11,000 MT of pearl millet in the open market at Rs.8120 per MT. The total stock of Pearl Millet at the FCI godowns is about 310,000 MT at various locations and it will find way into poultry/cattle feed if the prices are right.

Sorghum (Jowar) prices have moved by by 14%, a sudden jump to Rs.11,409 per MT. While sorghum for food is the highest priced commodity and is being sold in some areas at over 20,000 MT. The prices are higher than last year by 10.8% and against maize the prices are higher by 27.7%.

Barley prices moved up by about 12% to Rs.9000 per Mt range, but are lower than last year by 12.7%. In the futures market, barley prices have remained stable, while in the SPOT market in Jaipur, prices moved up by 0.5% t0 Rs.9035 per MT.

In the US the prices have been moving up steadily this week due to planting concerns. As per reports available 33% of corn plating has been completed, better than last years 24% during the same time, but is lower than the five year (2004/2008) average of 50%. Sorghum planting is at about 30%, against last year’s 31% and five years average 30%. Barley planting is also lagging behind at 22%, against last year’s 50% and five year’s average 54%.

Corn prices have strengthened due to the planting concerns, good domestic and export demand. Report indicate that Argentina may not be in the market for long and that Brazil also has a 2 MMT lower corn crop. May corn futures on CBOT was up 1.92% at $162.98 per MT, while July and Sept corn was up by 1.79% and 1.65% against last week, closing at $165.73 and $169.04 per MT. FOB values for Gulf are up to $185/189 per Mt for May-Aug while FOB PNW is up to 201/206 per MT for the same period. Sorghum on the other hand is trading at a discount and FOB Gulf price was indicated at $178/180 per MT.

DDGS prices in the US have also firmed due to increased overseas demand and high prices of SBM. Prices to SEA region were $223/234 for June/July delivery, while the FOB Gulf Vessel delivery was indicated at $179 per MT. With Indian SBM prices touching all time high, poultry and dairy feed manufacturers have started looking to source other protein meals, which is likely t o increase the demand and the prices over a long run as per the trade information available. Demand for Corn Gluten Meal is good indicator.

DDGS probably would find a market in other locations as well and would be a cheaper Protein source than SBM (on prorata), with energy from fat thrown in as an extra. The details of DDGS in the form of a handbook can be downloaded from the U S Grains Council website, using the link given below.

USGC DDGS Handbook: http://www.grains.org/ddgs-user-handbook

Another source of information on DDGS that can be utilized by users is the book from Iowa State University. The same can be downloaded using the link below.

DDGS Book from Iowa State University: http://www.matric.iastate.edu/DGbook/

Freight rates have also strengthened and if that is the indication for the revival of the economy is anybody’s guess. US Gulf-Japan was up to +43 per MT, while PNW-Japan benchmark was higher at +23 per MT. Brazil/Argentina to China was also higher at $39/40 per MT. Sources indicate increased iron ore business in China, which would be the factor, but there are more vessels that the demand and freight rates may not reach the high as yet.

Amit Sachdev
India representative
U S Grains Council
usgcindia@gmail.com

Mixed market signals for coarse grains

Maize prices at the market yard remained stable as last week to Rs.8200-8300 per MT levels on pan India basis. While prices in some production centers like Andhra Pradesh were closer to Minimum Support Prices, prices in Karnataka and Tamil nadu were lower at Rs.7850 per MT. Trade is of the opinion that the Karnataka crop is slowly getting over and next month would see a surge in prices. Reports from Bihar indicate increased arrival and thus a pressure on prices, which range from Rs.7700 – 8000 per MT. Bihar crop is expected to be down by 15-20% on initial reports from Bihar traders. The average price of maize in April was Rs.8288 per MT, about 16% higher than April 2008 and similar to last month (Mar 2009).

The market in Bangladesh is expanding slowly and demand is higher for corn. Local prices are ranging from $202-205 per MT for local maize and production is also expected to be lower by about 30%. Exports from India are catching up and prices range from $180-182 per MT at the border.

On the future markets corn prices have slumped by 2-4%, possibly due to sentiments that the Swine Flu (Infuenza A – H1N1) might effect exports. The spot prices in Nizamabad remained at Rs.8500 range, while in Davangere prices were higher by 1.38% to Rs.8031 per MT.

Pearl Millet (Bajra) prices were lower by 2% and were close to Rs.8850 per Mt at the market yard. Prices were higher than last year by 16% and also higher than maize by 7%. While in Uttar Pradesh the prices of Bajra may be lower than maize, in Rajasthan prices are rulling higher than maize as the commodity is staple in Rajasthan. Average prices of Pearl Millet in April 2009 was Rs.8910 per MT, 21.4% higher than April 2008 average and 3.74% higher than March 2009 average.

Sorghum (Jowar) pries moved by 2.2% crossing Rs.10,000 per MT mark this week. Against last year, prices are 2.6% higher and also higher by 18% against maize. Average price of Sorghum in April 2009 was Rs.9736 per MT, about 2.6% lower than April 2008 and 1.52% higher than Mar 2009 prices.

Barley prices moved up slightly by 2.2% to Rs.8000 range and were reported lower than last year by 21% in the end of April. Average April 2009 prices were Rs.8077 per MT, about 16% lower than April 2008 and about 3% lower than Mar 2009 prices.

In the futures market the prices slumped on anticipation of higher deliveries in future. The prices were down by 1.2 – 1.85%. While May delivery was down by 1.85% to Rs.9450 per MT, Sept delivery was down by 1.2% to 9850 per MT. Jaipur spot market was down by 1.2% to Rs.8985 per MT. The malt manufactured from barley is used primarily for beer and the market in 2008 has grown by 9% and is expected to grow in 2009 by 10%. Malt is also used in health drinks, and again the category is expected to grow by 8-10% in 2009 as per reports.

On CBOT corn prices moved up against last week by 6.5-7.5%, due to planting concerns. Corn for may delivery was quotes at $159.91; Jun $162.82; Sept $166.29; Dec $170.54 per MT. Current planting is about 22% complete against five year average of 28%.

Corn prices FOB US gulf were $180-186 per MT for Jun-Aug, while FOB PNW was $196-200 per MT. Sorghum of FOB basis was quoted at $175/177 per MT (US Gulf).

DDGS prices have strengthened and current CNF prices to SEA region are $220-225 per MT. Freight rates have come down somewhat, while US Gulf – Japan is down to 440 per MT, PNW-Japan is down to $21 per MT. Brazil-Argentina to China freight is indicated at $36/37 per MT.

Amit Sachdev
India Representative
U S Grains Council
usgcindia@gmail.com